Market's evolution 03 of October to 07 of October 2016

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Monday, 10 of October 2016

Market's evolution 03 of October to 07 of October 2016

The publication of relevant macroeconomic data and the appearance of some members from the main central banks were the engine during last week.

In Europe we have assisted a tug of war between Theresa May and the major European Union members given the refusal of the British president to compromise on issues of immigration as a condition of remaining within the common market. In this way, the leader from UK announced that in response, they would offer a beneficial trade agreement for both parties and ratified that they will activate the 50th Article in March from 2017 as well. For instance, the latest measures carried out in the country, the goal of zero deficit was abandoned (so we expect higher levels of debt). The uncertainty associated with such changes, was reflected in the currency, which depreciated against the euro by a 4%, so it closed the week trading around the 0,9013 EUR/GBP.

From Europe, despite the existing opened fronts (resignation of Pedro Sanchez from the PSOE, the inability to form a government in Spain, the constitutional referendum in Italy on December 4th and the weakness of the financial sector), increases in new orders, imports and production helped to keep the expansionary levels of economic activity (52,2 levels as planned). However, rumors (denied) concerning a reduction of the QE slowed market developments made the IRRs of bonds rebound. However, European equity markets closed mixed; while the Ibex35 suffered cuts of -1,77% (now around levels of 8.624), the STOXX50 closed flat at 3.000 levels, whereas the FTSE100 did with increases of +2% benefitting from the depreciation of the sterling.

In the United States we maintain the levels of uncertainty about the rate decision. The latest data published has not been helpful because it didn’t show clear trends; while fewer jobless claims were displayed (252.000 compared to the estimates of 257.000), the fall in the number of new non-farm jobs reversed the possibility that in the next meeting from the FED a standardization of types takes place. Weekly closures were flat as well for the major US selective (trading at levels of 2.153 and the S&P500 around the technological Nasdaq Composite 5.292).

Again, the week in Asian markets were settled without relevant news, however, we have known the levels of expansive manufacturing PMI for China remained (although those are still close to the range of contraction).

From Japan, the new data posted become to be adjusted. The growth in activity levels remained slightly expansive (at 50,4) without being able to get out from the range of uncertainty, while data services instead of rebounding, suffered further falls (up to 48,2 reaching contractionary levels).

The Asian equity markets however, closed with increases of +2,4% in both the Japanese reference selective as in the Hang Seng from China.

Crude oil prices have been the biggest winner last week. It recorded a rise of +5,85% after the apparent agreement between the different members to implement a freeze on production levels, achieving an upward break of the resistance located at the 50 USD/Brent. In this way, we will follow closely the next advances in the negotiations between the main producers from the OPEC crude members and those who are not part of it.

As for currency, as mentioned previously, the progress of the Euro remained over the Pound which we expect that continue taking profit from having a cheaper currency in relative terms. However, we observed no significant changes within the EUR/USD, closing the week at levels around the 1,1199 EUR/USD.